How Much Deposit For A Mortgage First Time Buyer
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How Much Deposit For A Mortgage First Time Buyer
Vish Kundalia explains how deposits work for those looking to get their first mortgage.
What is the minimum deposit for a mortgage as a First Time Buyer?
Depending on credit score, you can generally get away with a 5% deposit. The thing to be mindful of is that the more deposit you put down, the lower risk you become to the bank and so the more competitive interest rate you’ll get.
A 95% mortgage is high risk for the bank, so the interest rate is going to be higher. I would always encourage anybody to put down more deposit and pay less interest.
How can I save for a mortgage deposit?
When I bought my first property, I had a scheme with my employers called ShareSave. Check with your personal bank, and look on comparison sites to see who’s giving the best rate of interest. It’s worthwhile committing yourself to whatever you can afford to put away every month. You will earn some interest on it and build it up that way.
I also see a lot of people give a set amount every month to their parents, who save it for them. Some clients are very well organised and have spreadsheets of all their income, expenditure and disposable income.
Essentially, the more you can save, and the quicker you can save it, the less you will spend on rent. Ultimately, the quicker you get a mortgage, the sooner you finish it and the less interest you pay.
Saving isn’t easy but there are options out there. It is about effective budgeting and having a set amount every month to put away.
What are my options if I’m struggling to save for a deposit?
The Bank of Mum and Dad seems to be a very good one. If you’re trying to get onto the property ladder, I would always emphasise effective budgeting. Try and save whatever you can every month.
Can your parents gift you a deposit? That is also very popular. In some cases, parents are very happy to give you a 5% deposit so you get out of their property and move into your own – and start paying your own bills.
It’s also good to look at high interest savings accounts to put some money away.
It might be something as simple as looking at what you spend on going out or buying clothes. That does mount up. When you’ve got bills to pay and mortgages to pay, those are the priority, so make sensible investments.
Can I get a deposit from my family as a First Time Buyer?
Yes, you can get a gifted deposit from parents or family. Some lenders will actually let you have a gift deposit from a friend as well.
As a First Time Buyer, your gifted deposit can come from absolutely anywhere, although parents and grandparents are typically the go-to.
Can I use a credit card to fund my house deposit?
I would say yes, with some lenders, but I would not encourage somebody to do it because taking out cash with a credit card has a very high APR.
If you were to have a credit card, how much can you take out? Straight away, it would impact your affordability because you’d have to include the credit card repayments as part of your outgoings. You could end up doing yourself an injustice in terms of how much you could borrow.
For example, if you could borrow £100,000 and you took out a credit card to pay the deposit, all of a sudden you might only be able to borrow £80,000 once that credit commitment is factored in. In that case it’s probably not a smart idea.
Try to stay away from using credit cards. Some lenders may let you use a loan as a deposit, which could be a more sensible way if it’s over a longer term. But again, it’s not a preferred method because it has to be affordable.
But for a qualified professional, with a very good income but no deposit, it could make sense to take out a loan. It would potentially still be affordable. At a lower salary, taking out a loan might put you into more financial difficulty than it’s worth.
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What is the average deposit for a First Time Buyer?
I encourage all of my clients to go with a minimum of 10%. Most people want to go with 5%, but I recommend 10%.
Generally, 15% is a good amount of deposit. The reason is that the difference between interest rates for 95% Loan to Value and an 85% Loan to Value is quite drastic.
The more deposit you can put down, the better it is – because you’re paying less interest and you’ve already got equity in the property. There’s almost always going to be capital growth in the property and you’d expect it to go up in value each year.
Can I have a mortgage with 0% deposit as a First Time Buyer?
Unfortunately not these days. There are no products to get 100% mortgage now, as of February 2025. The risk is very high to the lender. Having a 100% mortgage just doesn’t work anymore.
It may potentially be available on shared ownership or if you are purchasing a new build property. In the last few years since the Help to Buy scheme has gone, some developers may gift a 5% deposit as goodwill when you buy the property. That would essentially give you a 0% deposit – and then you go for a 95% mortgage.
That’s still very difficult because most lenders will not give 95% on a new build. The long and short of it is that 0% deposits are a thing of the past and we probably won’t see them for a long time.
Should I save for a bigger deposit? What are the advantages to this?
I would encourage anybody that wants to buy property to put down the largest possible deposit. The more you put down, the lower the interest and the better the rates.
Given where the market is now in early 2025, compared to two years ago, a lower rate will make a big difference. Lenders work on Loan to Value – and at 95% it will be the highest level. The rates will change for every 5% decrease to that, all the way to 60% Loan to Value.
If you could provide a 40% deposit you would qualify naturally for the cheapest products available in the market.
How much can I borrow as a First Time Buyer?
This question comes up quite a lot, but it’s actually all about what you can afford. We look at your budget, your age, your circumstances and your income, as these factors all determine how much you can borrow.
Generally, lenders will give you 4.5 to 4.7 times your income as long as there are no other credit commitments or overheads in the background.
Some could give you up to six times your income. It depends on the circumstances and whether you meet the lender’s criteria. Get in touch, and I can run the affordability calculations for you and tell you how much you can borrow.
If you imagine you can borrow 4.5 times your income, you’d never be disappointed – then if I can get you more, that’s a bonus.
What other costs are associated with a mortgage?
There is often a product fee attached to the mortgage – especially if the bank gives you a great rate. A product fee could be up to £1,000, which gives you the privilege of a good rate. That fee can be paid up front or added to the loan.
You also need to allow for the cost of your legal fees, which have gone up in the last few years. For First Time Buyers, depending on the property value, stamp duty doesn’t usually come into play. If you are going to consult with a broker to represent yourself and do the work for you, there’s probably a broker fee involved.
I would suggest working with a broker that potentially will take a small fee for the advice and application and then charge the rest at mortgage offer. Then, if for any reason you can’t get your mortgage, you don’t need to pay a full fee.
Finally, most lenders tend to offer a free valuation, but you can also have an enhanced survey on the property. There are three different levels of surveys – the basic one is free with most lenders, and beyond that, the depth of the survey will be reflected in the cost.
People often have independent surveys done, which is worthwhile if you’re buying an older home or you have any reservations or concerns about the property.
I’ve seen people pay as little as £500 for this up to about £1,200. It depends again which part of the country you’re located in in terms of the surveyors’ cost. It’s highly advised, because if anything comes up once you’ve bought the property, there are no potential comebacks.
You’ve demonstrated how a mortgage broker can help here. Have you got anything else you’d like to add?
Mortgage brokers generally add a lot of value to a process that can be very overwhelming. First Time Buyers have never been through this before, and we’re here to hold your hand and make it easier for you as an individual.
You can pick up the phone, or if it’s out of hours, drop me a message – I’ll always come back to you. We will always support you and hopefully get you the best rates and deals available to you.
We had a base rate change a few weeks ago, in February 2025 and a number of my clients had mortgages offered – and now, as a result of the base rate change, their actual deals have gone down. I’ve gone back to their lenders and got them a new deal where their rates have gone down by 0.25%.
For some clients that can make a difference of up to £50 a month. In a two year deal, that’s a saving of £1,200 for a client, and that could go a long way towards paying for their legal fees, for example.
Brokers watch the trends, know the markets and understand where they can save you money. I also have clients who send me details about potential properties for my thoughts, and I’m always happy to help.
So it’s worthwhile engaging with a broker – you can’t go wrong with it. Even if you’ve had an initial conversation and you still choose to go on your own to a bank, at least you’ve had a conversation. We’re not going to charge you a fee for having an initial chat with you.
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